Transition challenges of a Cédulas overhaul

The Spanish covered bond law could be set for profound change that will bring it into line with the best in show schemes. Proposals set out on Wednesday by the Spanish treasury tie into capital requirement regulations and will become unstoppable under their own momentum. The major challenge is not that investors will have less collateral protection but rather the transition process itself. Grandfathering existing deals isn’t a viable option, there would need to be a huge debt exchange of all existing bonds for new ones or a fundamental change in terms and conditions.